2018-03-06

Wall Street Cohn Exits Trump Admin

I thought it was strange when Trump filled his administration with Wall Street alums. Some interpreted that as Trump abandoning his campaign pledges. I took it as Trump not having appointments ready who were on board with his policies and possibly also not wanting conflict with the GOP establishment right away. Now that he's ready to implement his policies, a shake-up is underway.

Back in 2014 I outlined what I expected to happen. That is exactly what is forming now in 2018. As Trump pushes ahead on trade, a coalition of economic forces will rise to support him:

Prediction

The protectionists are ever so slowly gaining the upper hand thanks in part to negative social mood. 2008-2009 will probably mark the peak moment for Wall Street and the Treasury Department, even though there is as yet no sign of it in Washington. Changes can be seen in the form of issues such as immigration, which has turned the grassroots of the conservative movement against the Chamber of Commerce and large corporations (due to an attack initiated by the latter against the former). This has pushed the Overton window of acceptable debate among conservatives who can now take shots at big business. There is also the growing libertarian faction pulled together by Ron Paul that supports his son, Rand Paul, that consistently attacks the Federal Reserve and Wall Street. Put it together and it is not hard to envision an anti-Wall Street, pro-manufacturing political consensus emerging. This will cut across party lines, with manufacturing unions pulling in Democratic support if there are specific bills to vote on.

I didn't expect the U.S. would proactively launch a trade confrontation with China based on trade alone, but we don't yet know if the push on trade is part of a larger geostrategic China containment policy. Trump's positive comments towards Russia and anti-China trade strategy could be part of a grand strategy of pitting Russia against China. The main game in geopolitics these days is between China, Russia and the USA, with the loser being the odd one out. Russia lost in the 1970s through 1990s, the USA was on the outs in the 2000s and 2010s.

Everyone thinks Trump lives and dies by the Dow Jones Industrial Average, but I expect Wall Street and the Federal Reserve could be targets (the Fed legitimately) if the economy turns down. An economic downturn might not cost Trump if the public cheers confronting China. We are in a new political era where identity, community and sovereignty are becoming more important. The seeds of the next crisis were sown by governments and central banks over the past 8 years. A downturn would be negative for Trump, but if any president can flip the narrative and shift blame, it is Trump. The stock market is not the economy. Wall Street might hate protectionism, but that is a feature, not a bug. Wall Street is still hated for the 2008 bailouts. The political winds blowing strongly in Trump's direction. One way or another, Wall Street is cruising for a political bruising.